National Minimum Wage (Amendment) (No. 2) Regulations 2020

Debate between Baroness Burt of Solihull and Lord McNicol of West Kilbride

Monday 16th March 2020 Grand Committee

[Baroness Burt of Solihull (LD)]

My Lords, I thank the Minister for his explanations. He has gone some way to answering some of my questions. The amendments seem reasonably straightforward. They are very welcome in so far as they incorporate changing work patterns into the minimum wage regulations. Thinking about the current coronavirus situation that besets us, more and more of us will be working irregular work patterns, including, of course, working from home.

As long as the worker performs to the requirement of the contract, I am not sure why you would not measure the amount of work in total hours, or even, more radically, in outcomes achieved. However, outcomes might be a stretch too far away from what we are talking about today, except for those for whom performance bonuses comprise part of their remuneration. My understanding is that performance bonuses would be excluded from the basic minimum wage calculation. Can the Minister confirm that?

The instrument’s main thrust is to accommodate the changing work payment cycles that people have today—for example, fortnightly or four-weekly—and ensure that their pay is fair and falls within the minimum wage regulations. Basic hours might indeed vary, as the Minister said, but the employer must ensure that when these are divided up by the number of pay periods, the average payment paid each month equals at least the minimum wage. For workers who work on, for example, bank holidays and receive premium payments, the rules currently do not allow for premium payment arrangements in respect of a worker’s basic hours. As I understand it, the regulations rectify this.

Finally, could the Minister elaborate on the relevance of the calculation year? I fully understand the change from the worker’s initial start date as a reference point for calculation to a point where the employer can specify when the year will be calculated from, but does that mean that a worker will need to wait nearly a year to determine whether they have worked any overtime? I am sure this cannot be the case. I would be very grateful if the Minister explained that a little further.

[Lord McNicol of West Kilbride (Lab)]

My Lords, the Minister talked about being the best in the world. We on this side of the Committee obviously support that aim. Six countries pay a higher or better national minimum wage than the UK—Australia, Luxembourg, France, Germany, New Zealand and Belgium, according to the House of Commons briefing. We will happily work with Her Majesty’s Government to leapfrog those countries. Could the Minister outline when he believes the UK will surpass those countries?

I gave a number of my questions to the Minister earlier so that we could try to get some answers on to the record. In fact, the noble Baroness has asked many of the technical questions, so I will not repeat them.

Since the introduction of the national minimum wage in 1999, the Government have ordered employers to repay more than £118 million to 835,000 workers. The Government have issued more than £40 million in financial penalties and completed more than 78,000 investigations. A large number of companies and businesses out there are obviously still not paying the national minimum wage. The SI touches on a number of specifics; the intention behind it is that the Government will be able to reduce non-compliance rates since companies will be able to monitor the hours worked by salaried workers and identify potential underpayments of wages. If that can be done, we obviously support it, but how will the Government enforce or monitor this compliance? Does HMRC require any additional resources to cope with these rule changes?

Before the SI was brought forward, a consultation by BEIS took place and of its 60 respondents, 43 agreed that the rules regarding the salaried hours worked—as touched on earlier by the noble Baroness, Lady Burt— caused difficulties when making premium payments. Of these 60 respondents, 23 suggested that salaried hours rules make the national minimum wage calculations complex and increase the risk of non-compliance. If these rules can help to reduce that complication, without penalising the workers, we would obviously be happy to support them. Will the Government be monitoring this to ensure that there are no detriments to the workers?

The SI widens the range of pay arrangements that are compatible with the rules on the national minimum wage. Again, I will not repeat the questions we have heard on the payment cycles, so I look forward to the Minister’s answer. The SI also proposes to enable employers to specify the calculation year for their salaried workers. Currently, the calculation year depends on the individual’s starting date. Again, does the Minister see the possibility of any detriment? How will the Government protect against any detriment to individual workers if the calculation year could change?

In April 2019, the Low Pay Commission estimated that 424,000 people were paid the national minimum wage, the national living wage or less. Do the Government have any separate departmental figures, or are the figures we are working from the LPC’s? Those 424,000 people are about 1.5% of those aged 16 and older in the UK job market—an awful lot of people. What activity is going to be involved with the expenditure of funds that the department will use to monitor any abuses in the enforcement of the national minimum wage?

On businesses themselves, the Government have stated that HMRC will visit selected new, small businesses to educate them on the national minimum wage and support them in getting the process right. How many businesses have been selected and how many will HMRC visit before April?

I finish by noting that the Government have stated that a new single enforcement body to crack down on employment law breaches will be part of a new employment Bill. Can the Minister say when that Bill will be laid before Parliament?

Brexit: Protection for Workers

Debate between Baroness Burt of Solihull and Lord McNicol of West Kilbride

Thursday 7th March 2019 Lords Chamber

[Lord McNicol of West Kilbride (Lab)]

My Lords, I first thank the Minister for repeating the Statement made in the other place and especially for his kind words about Lord Bhattacharyya.

The crux of the Government’s announcement is the two amendments they will table to the implementation Bill. We are told that these seek to ensure there is no regression of workers’ rights, and that Parliament will be given an opportunity to consider how rights in the UK tally with those in the EU. These are noble aims which I am sure this House can get behind. However, I am afraid that on this side of the House we have considerable concerns over whether these amendments will achieve and deliver this.

I remind the Minister of the comments that Frances O’Grady of the TUC made yesterday in response to the announcement:

“In the face of a government determined to reduce rights, these measures would in no meaningful way compensate for the loss of the protections that currently exist”.


The TUC and various unions have been clear in their response to the proposals, saying that they are not good enough and fail to protect workers after we leave the EU. Noble Lords will not be surprised to hear that I agree with those statements.

I turn to specifics. I am interested in the Government’s process of getting to this announcement. Can the Minister detail his department’s process of consultation with the different unions and the TUC? The issue at the heart of this announcement is that, even if a Statement by the Government notes that legislation would in fact lead to a regression of rights, there is no power to stop the Government proceeding with their intended course of action. Can he explain how these amendments would stop a Government reducing workers’ rights if they wanted to? If he thinks I am being a bit unfair, I remind him of the working time directive. It was a Conservative Government who sued the European Commission, claiming that there was no legislative basis for the directive since working time had nothing to do with health and safety at work. Luckily for workers in the UK, the Government lost.

On the process of adopting future improvements in EU legislation, the proposal is equally lacking. The only means of challenge is through Parliament, not the courts, and thus subject to any Government’s majority—not material facts that could be legally tested. Furthermore, these proposals apply only to changes to primary legislation. Any other forms of legislative change would not be covered. Given that the bulk of UK legislation to implement EU law is secondary legislation—the Working Time Regulations, TUPE and health and safety regulations, to name but a few—would the examples given above be covered under the new proposals? As we have seen recently, Commons procedures may not permit sufficient amendments to actually deal with all the problems at hand.

The Statement uses the words “standards” and “reduction of standards” and I seek clarification from the Minister on this. In speaking against Amendment 3 on the Trade Bill last night, the Minister said:

“First … The term ‘standards’ does not have a single legal definition which can easily be called upon … Secondly, on the notion of ‘reducing’ standards, how the Government would prove that they were or were not reducing them would be problematic”.—[Official Report, 6/3/19; col. 631.]


The Government cannot have it both ways. Either the use of the terminology “standards” and “‘reducing’ standards” is correct and proper or it is not.

The Statement provided today is not good enough. The comments made at its beginning suggesting that the Minister’s party has suddenly assumed the role and mantle as a champion of workers and working people is baffling. Annual earnings are more than 3% lower than they were in 2008 and nearly 4 million people are now in insecure work. If the Government are serious about workers’ rights in the UK, they have a long way to go to prove it.

[Baroness Burt of Solihull (LD)]

I agree with the Minister that we have a proud record of protecting workers’ rights. As he said, in many cases they are stronger than in European law.

I welcome the enforcement measures announced by the Secretary of State yesterday on existing rights. We all know that it is pointless introducing legislation unless someone intends to enforce it, and enforcement costs money. We on these Benches will look closely at the forthcoming spending review to check that the Secretary of State has been as good as his word.

What we see in the Statement yesterday and the Opposition’s response is a playing out of the traditional distrust between the two parties. The Government seek to assure the Opposition that they will not dilute workers’ rights post Brexit. However, I agree with Labour that the Statement does not provide all the protections that would guarantee that workers’ rights will not fall behind those enjoyed by workers in the European Union.

In the Commons yesterday Opposition spokesperson Rebecca Long Bailey, and the noble Lord, Lord McNicol, this afternoon, made the telling point that the promise given by the Government does not apply to secondary legislation, which could allow each existing EU-derived right to be watered down with ease. This latest move has been described as a cynical attempt to buy off wavering Labour MPs from leave constituencies so that they can justify voting with the Government on the EU withdrawal and implementation Bill. We on these Benches will not fall for it and the Government have a long way to go yet to satisfy a distrustful Labour Party.

The arithmetic does not yet stack up in the Government’s favour and, as things stand, they are destined for another whopping defeat in the Commons next week. The only way to guarantee that British workers’ rights keep parity with those of European workers is for Britain to remain within the EU. Why do not Labour and the Government realise that it is in the interests of all the people they represent to give them a say and back a referendum on the deal?

Business Contract Terms (Assignment of Receivables) Regulations 2018

Debate between Baroness Burt of Solihull and Lord McNicol of West Kilbride

Wednesday 17th October 2018 Grand Committee

[Baroness Burt of Solihull (LD)]

My Lords, these regulations address a problem that I did not know existed. The colloquial expression for “assignment of receivables” is factoring, and that is what I know it as. Why would companies build these terms into contracts, with the exceptions permitting, unless there was a question mark about their payment? I will be interested to hear the Minister’s comments about that. It seems unjustified. I understand the importance of being able to get hold of money for your contract early on, but if companies paid in a more timely way, factoring would perhaps not be necessary. Those are just a couple of comments, but I wholeheartedly welcome the regulations.

Will the Minister explain paragraph 10.13 in the Explanatory Memorandum? It is headed “Additional Exclusion”. It states that contracting parties need to be certain that they are dealing with each other rather than an assignee. Does the Minister understand that to mean subcontracting? If he does not, are there other examples of what could be meant by that? Other than that question, I welcome this legislation.

[Lord McNicol of West Kilbride (Lab)]

I am grateful to the Minister for the introduction to this SI. This is my sixth week in your Lordships’ House and it is a pleasure to be speaking on my first SI. If I make any procedural or other errors, please forgive me. I am still learning and have a long way to go.

Invoice financing as set out in paragraph 7 of the Explanatory Memorandum is one way of securing working capital. More simply, it is the ability to borrow money against unpaid invoices to improve cash flow. We on this side agree that invoice financing has its place, but it is not always the solution to the problem. When laying these regulations, Her Majesty’s Government have missed a great opportunity to sort out the wider issue, which the Minister touched on, around payment culture. The recent consultation on prompt payment received some very good responses on the wider issue of late payment which simply must be addressed soon. In excess of £2 billion a year is owed to SMEs in late payments—payments past the agreed invoice payment date. Does the Minister agree that this is a far larger and more easily solvable problem?

I was general secretary of the Labour Party before coming here. The Labour Party led on this by example and had 30-day payment terms. More widely, there is the absurdity of having a voluntary prompt payment code. Many large firms are signatories but there is no enforcement, so in real terms the code is worthless, especially as many companies have 60-day terms.

What if a company breaches those terms? Let us not forget that Carillion was a signatory but then went on and changed its payment terms to 120 days. Does the Minister agree with me that a sensible term for the code, even in its voluntary state, would be 30 days? Why has the prompt payment code not been made compulsory? Why has consideration not even been given to making it so? These reforms would help to solve the problem that IF looks to solve.

The correspondence with the Secondary Legislation Scrutiny Committee touched on the question of implementation dates. I note the Government’s response supporting the status quo, but do they still believe that there is any point in having common commencement dates? The CCDs of 1 October and 6 April each year are introduced to help businesses to plan for new regulations and increase awareness of the introduction of new or changed requirements, yet these regulations are to be introduced 21 days after they are passed. As the correspondence with the Secondary Legislation Scrutiny Committee reveals, it is not as if there has been a great rush to get these regulations in. As we can see from the Explanatory Memorandum, the first discussion paper was published in 2013, so I am sure that another few months’ delay to ensure better regulation would not have hurt.

I congratulate the Business, Energy and Industrial Strategy team on their detailed and helpful work on the impact assessment and the Explanatory Memorandum. Having said that, I think the committee has done a brilliant job of sorting out the documents before us and holding the Government to account for a certain amount of confusion. It might have taken time, but I believe it would have been better if the Government had issued new documentation following the consultation. As the Minister said, substantial amendments to the regulations were made, so was the impact assessment carried out after they were made or before, in 2013?

I turn to the substance of the regulation. Could the Minister satisfy me that no problems or unintended consequences of these regulations may arise in the accounting treatment following the introduction of these regulations? I am thinking particularly of when income from invoice financing is to be recognised in the accounts of a trading company when that is not done through factoring. If the Minister is unable to give me a direct answer today, I am more than happy for him to write to me.

Paragraph 7.4 of the Explanatory Memorandum states that this regulation will help diversify finance markets and encourage competition. Could the Minister expand a little on how exactly that will happen? The bit that confuses me is the exclusion of large companies from IF. Could the Minister explain why they have been excluded, especially as paragraph 10.7 of the Explanatory Memorandum, as he touched on earlier, outlines the problem with large commercial contracts, not large commercial companies or businesses per se? Paragraph 10.8 then outlines the solution of banning large companies from IF. This appears to be a completely different answer to a completely different question. Maybe the Minister could explain what the persuasive arguments by the legal profession were and how these led the Government to exclude large companies from IF.

In the Explanatory Memorandum, under the heading “Territorial Extent”, the paragraph following Paragraph 10.14 is labelled 10.1. I think that this is just a typographical mistake but it should be picked up on. The serious point here is that the regulations appear to interact with powers devolved to the Scottish Parliament. Is that right? If so, did the Government consider seeking a legislative consent Motion? If not, why not?

As I said at the start, the Opposition will not oppose these regulations on invoice financing, but it is a shame that the Government missed the opportunity to bring forward legislation to improve invoice payment practices within these regulations.